Chris Lombardi puts defense and security under the spotlight, as he shares his takes on recent NATO and EU cooperation and provides insight into the company’s own long-term strategic partnerships in Europe.

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Playing the energy game

For much of the twentieth century the UK government had a 51% stake in an energy firm which controlled a massive portion of the world’s oil and gas reserves.

European Voice

2/22/06, 5:00 PM CET

The firm was openly used by the UK government to achieve political goals at home and abroad, and to help the UK flex its muscles as a regional power.

Without appropriating the resources of Anglo-Persian, as BP was then known, the UK’s First World War campaign would have faltered. Few questioned London’s right to wield this important instrument.

Today there are parallels with Gazprom and its 51% stakeholder, the Russian government.

Yet as Moscow takes

advantage of its role as an energy superpower and high energy prices, the crisis over gas supplies to Ukraine, Moldova and Georgia has prompted many to question Russia’s right to use Gazprom in a political way.

EU officials have described a collective awakening and member states and the European Commission are now clamouring to recalibrate the EU’s energy policy accordingly.

Few doubt that Russia will continue to be an important supplier and so Commission proposals are expected soon on how to amplify the EU’s voice in Moscow.

Rytis Martikonis, Lithuania’s ambassador to the EU, points out that Moscow’s use of Gazprom represents a choice of traditional diplomacy over post-modern diplomacy – power politics over a rules-based system which developed rapidly towards the end of the last century.

According to Keith Smith, a senior associate with the Washington-based Centre for Strategic and International Studies, Russia must be pulled back into a rules-based system.

He says Russia’s ratification of the Energy Charter Treaty – which it signed on 17 December 1994 – would mark a major step towards pulling Russia into a rule-based system and the end of old-style diplomacy.

The charter brings together 51 nations – including all 25 EU member states – in an attempt to govern the rules for energy co-operation.

Commission officials agree the charter contains many of the measures necessary to secure energy supply.

Increasingly European diplomats are hinting that Russia’s presidency of the G8 this year may be a good opportunity to ratify the protocol.

Michael Emerson of the Centre for European Policy Studies agrees: “Russia is keen to be seen in a favourable light as a great power, the major variable is how hard the EU and others go at this.”

Emerson says that if Russia ratifies the charter, the most relevant part in relation to the recent gas crisis would be the dispute settlement mechanism which could have been useful, although it is optional.

He believes a more powerful tool lies in the separate but related Transit Protocol which would at a stroke allow the EU to diversify its energy supplies using existing pipelines.

“If all the parties signed and ratified the Transit Protocol, Gazprom would be obliged to open pipelines to Kazakh gas,” says Emerson.

But for the moment Russia’s strategic interests are drowning out the EU’s quiet requests for ratification.

According to Anja Köhne, a project manager with WWF, the conservation group, responsible for energy and climate issues in EU foreign policy, the real answer to stop this culture clash between Russia and the EU is to step away from the “big-man politics” of petrochemicals.

“It is evident that for future foreign policy to be constructive it depends on production and consumption patterns,” she says.

Köhne adds that the EU needs to look at renewable energy sources, to find alternatives and diminish dependence on Russian supplies, in order to change Russia’s old diplomacy habits, “in Russia old energy is intermeshed with the Kremlin”.

Others are trying to cut that mesh by calling on Russia to open its energy markets. “Europe is liberalising in a number of ways and Russia still

holds a number of important monopolies,” says Martikonis, “Russian markets must be open to European investors, European takeovers. I am not

that afraid of Russia intermingling in internal affairs of Lithuania, Germany

or Poland. I am more interested in the openness of Russia in a similar

way that Russia has in the EU, be it Gazprom, railroads or electricity.”

This it is hoped would not only weaken the political link between the Kremlin and energy companies but would also give Russia a greater stake in developing a rules-based system.

But perhaps Russia will find it as difficult to give up such a valuable strategic asset today as the UK once did.

Crude facts

EU imports of crude oil (2002, % share)

Former USSR 26.0

Norway 21.5

Saudi Arabia 11.2

Libya 8.2

Iran 5.5

Leading producers of crude (2003, % share)

Saudi Arabia 12.7

Russia 11.7

US 8.7

Iran 5.2

Mexico 4.9

Natural gas facts

EU gas imports (2002, % share)

Russia 32.7

Norway 29.1

Algeria 25.2

Non-specific origin 7.6

Nigeria 3.0

World producers of natural gas (2004, % share)

Russia 22.2

US 19.0

Canada 6.5

UK 3.6

Algeria 3.2

Sources: European Commission, Organisation for Security and Co-operation in Europe, International Energy Agency